Existing federal regulations generally prohibit the Federal Home Loan Mortgage Corporation and any affiliate thereof, the Federal National Mortgage Association and any affiliate thereof, and any Federal Home Loan Bank from purchasing, investing, or otherwise dealing in any mortgages on properties encumbered by private transfer fee covenants, as defined, securities backed by such mortgages, or securities backed by the income stream from such covenants, unless the private transfer fee covenant meets specified requirements, including that it provides a direct benefit, as defined, to the encumbered property or is otherwise exempted as provided.

Existing law defines a transfer fee with respect to real property and requires the receiver of the fee as a condition of the payment of the fee, on and after January 1, 2009, to record specified information in the chain of title. Existing law specifies that when a transfer fee is imposed upon real property on or after January 1, 2008, the person or entity imposing the transfer fee, as a condition of payment of the fee, must record a separate document meeting specified requirements. Among other things, that document must contain the title “Payment of Transfer Fee Required” in at least 14-point boldface type and include names of all current owners of the real property subject to the fee, and the legal description and assessor’s parcel number for the affected property, and the fee amount.

This bill, unless a specified exception under federal regulations applies, would require that document, for private transfer fees created on or after February 8, 2011, to contain a notice in at least 14-point boldface type disclosing certain information, including that federal housing agencies are prohibited from dealing in mortgages on properties encumbered by private transfer fee covenants that do not provide a direct benefit to real property encumbered, and that if a person purchases such a property, that person may have difficulty obtaining financing.